When you see Congressional and presidential administration officials commenting on fiscal policy, and Federal Reserve officials commenting on monetary policy, that's normal.

But when you see Fed officials commenting on fiscal policy -- something they never do -- that's not normal and is indicative of extraordinary times.

San Francisco Federal Reserve Bank President Janet Yellen has done the latter, stating in no uncertain terms that the U.S. economy needs a fiscal stimulus package to deal with its most serious economic slump in her career.

"The current downturn is likely to be far longer and deeper than the 'garden-variety' recession," Yellen said, in a speech. "If ever, in my professional career, there was a time for active, discretionary fiscal stimulus, it is now." Yellen said the global financial crisis and economic recession pose a serious risk of a prolonged period of stagnation.

"It's worth pulling out all the stops to ensure those outcomes don't occur," Yellen added.

The non-manufacturing component, or the service sector, of the U.S. economy contracted substantially in January 2008, fanning fears that the nation's economic slowdown is worsening.

The Institute of Supply Management's non-manufacturing index, which measures about 90% of economic activity, plunged to 41.9% in January 2008 from 54.4% in December 2007 -- its lowest reading since October 2001, the ISI announced Tuesday, in a statement.

Analysts had expected the index to fall to 53%. Readings below 50% indicate most companies are cutting back, or experiencing less business. Moreover, a sub-50% reading usually indicates the U.S. economy is contracting.

An unexpected drop

Economist Glen Langan told BloggingStocks Tuesday the substantial drop is not good news for the U.S. economy.

To stock investors, among others, the currency markets sometimes appear a tad confusing.

Case in point: currency analysts and traders expect the U.S. dollar to rise versus major currencies this year, despite declining short-term interest rates in the United States. The statement appears to be a contradiction, given that the No. 1 factor in a currency's strength is its interest rate. High interest rates attract money and drive a currency higher versus currencies with lower interest rates, all other factors being equal.

However, interest rates, while the most important factor, are not the only factor affecting currency values. A nation's economic growth - - including prospects for growth - - also is a strong factor: stronger economies attract money, driving their respective currencies higher. Further, it's the latter that's leading analysts and traders to argue that the dollar should rise from its multi-year lows in 2008.

On Monday afternoon the dollar was mixed against the world's major currencies, falling about one-quarter cent to $1.4821 versus the euro and about 1 cent to $1.0732 versus the British pound. The dollar rose 0.25 yen to 106.72 against Japan's yen.